All Forum Posts by: Stefan Tsvetkov

@Alex Silang Fast forward 6 years, and the city is the worst price performer out of 24 cities (>50k population) in the state of Massachusetts, just 4% above its 'fair valuation' level of 2008. I study cities/areas for out of state investing. I see income growth as subpar within the state, and population growth somewhat average. Interesting, how nothing really changed performance-wise in this time.

Per the above framework, in North Carolina Charlotte, Wilmington appear slightly overvalued as well at +9% and +6% respectively, though other cities, say Greensboro are undervalued (-10%).

In South Carolina, most cities are under to fairly-valued, with Columbia at -15% and Charleston at -2%. This is a personal analysis of mine, let me know if need any help!

I would be cautious about Texas (most cities) and Arizona (Phoenix, rest Maricopa county; Tucson looks actually okay) markets right now. These have been the best performing markets and also they have housing shortage working for them (reference Census population/housing unit counts data). 

That said most markets there still appear overvalued >10% based on historical valuation (price/income ratios), its spike in part reflecting the housing shortage, though not fully.

In which markets do you see "Housing prices are growing so much faster than incomes"? The opposite is true in Louisville, KY, as the city is as of Q1 2020 8% undervalued based on historical price-income ratios. 

I do not believe Louisville is in a bubble. There are other cities/states that are. 

Short of the high investor competition over there, Louisville is on my list of out of state markets to invest in right now.

@Adam Carbone I would not bet on a market correction in Louisville, KY too much. While cap rates may not be super high over there (reference reitnotes.com), hinting towards low absolute affordability, the market is still technically 'undervalued' -8% as based on deviation from its historical affordability/price-income relationship.

If a broad-based price correction was top happen post-COVID in U.S. real estate, I would expect a small 3-4% drop in Louisville prices, as income drops in a commensurate manner.

@Alon Gilmore I am considering investing in large multifamily in the Pittsburgh area currently. Prices have rallied 37% in Allegheny County (Pittsburgh) since their 2010 'fair valuation' levels. The city has experienced one of the strongest price performances in the Northeast this market cycle.

In spite of that the city is though undervalued at -8% as of Q1 2020 based on historical price-income relationship. It is on my list of out-of-state markets to invest in.

@Jon Q. I agree, from a buy and hold perspective, buying into "strong population and job growth markets and therefore increasing price trend line", is a good approach, in part due to momentum/autocorrelation, and also yes, these markets have the strong fundamentals. 

This is assuming a "deal", at the property level, can also be found, and surplus cash flow/appreciation combined bring the highest total return.

That said, "strong population and job markets" seem more likely to become overvalued at some point, so one needs to pair the above data with valuation ratios to protect from a drop at peak of cycle.

E.g. some of the strong population/job growth areas in recent decades, cities in Colorado, Texas, Idaho, Arizona, Nevada are currently overvalued: Boise, Las Vegas, Austin, Fort Worth, Phoenix, San Antonio are overvalued >10% as of Q1 2020 based on historical price-income relationship.

Columbus is (nearly the only) the strong performing city in Ohio this market cycle, 35% above its 2009 'fair valuation' level. It is also fairly valued currently based on house price-to-local-income relationship.

Cincinnati has performed decently at 18% above its 2009 level. On the other hand, Cleveland 'fair valuation' has been in 2006 (I commented on another thread) and its price performance is ~ flat since then.

Both Cleveland and Cincinnati are undervalued right now, while Columbus is not. Hope this helps!

I agree. Dayton is 19% undervalued based on historical house price-to-local-income relationship. Price performance has not been particularly strong though, as just 5% above its 2006 'fair valuation' level. Cincinnati is undervalued too, though a better price performer this cycle.

Cleveland has been a weak-performing market price-wise in the state of Ohio this market cycle - flat since 2006 'fair valuation' prices. It is also strongly undervalued right now at -20% based on deviation from historical price-income relationship. 

Cincinnati has been a stronger-performing market 18% above its 2009 'fair valuation' level. It is also undervalued at -17% though its price performance has been much healthier.

Cleveland is, generally, a higher cap rate market than Cincinnati (reference reitnotes.com)